Thursday, December 21 2017 12:56
Alexandr Avanesov

The Armenian parliament introduced amendments to the Tax Code

ArmInfo. The National Assembly of Armenia adopted amendments to the Tax Code proposed by the Government of Armenia at the meeting on December 21 in the second and final reading.

According to RA Deputy Minister of Finance David Ananyan, 36 proposals were submitted to the second reading, of which 12 were submitted by the government, and 24 from parliamentary deputies from the factions of the Republican Party and "Elk". After the negotiations on a significant part of these proposals, a compromise was reached. The initiative will revise 242 regulations and about 113 articles. Changes and additions are divided into three main groups: editorial changes - 180, terminological - 29, and substantial - 30. In general, the package is aimed at improving tax administration, and the business environment. They, according to David Ananyan, will form a good situation after January 1, 2018.

According to the package, taxation of dividends will be made only after the shareholders meeting of the company decides to redistribute profits. "The current legal norm is contrary to the principles of corporate governance," the deputy minister said. According to him, today's legal regulation says that if until June 30, following the reporting period at the general meeting of shareholders of the company, a decision is not made to redistribute profits, the state nevertheless considers them redistributed and withdraws its share in the form of tax. As clarified by the representative of the Ministry of Finance, initially was set a goal - to offer a certain tool in terms of tax administration. However, at present, it is decided to abandon this tool, which does not comply with generally accepted principles of corporate governance. The proposed amendments to the taxation of dividends also specify the rights and obligations of individuals - citizens of foreign states and citizens of RA, who receive dividends as shareholders.

The Tax Code, adopted in the autumn of 2016, provides for taxing the dividends of individuals - non- residents since January 1, 2017, and residents since January 1, 2018 in the amount of 10% and 5% respectively. Today, the Ministry of Finance is proposing to specify the rule of law, because at this stage there is no clear definition of which period this regulation should cover - from 2000 to 2018, or after the enactment of the legislative norm. "We propose to impose taxes on those dividends that foreign citizens and citizens of the RA have received, accumulated and distributed - from January 1, 2017, and from January 1, 2018, respectively," Ananyan said.

Another rule concerns overpayments accumulated in the line of the minimum profit tax, which in the future can be used to pay off tax liabilities formed under the profit tax. As the deputy minister reminded, from 2004 to 2014, In Armenia, there was a legislative requirement to pay a minimum income tax. Since January 2014, having refused such a rule, the state has enabled taxpayers to send overpayments accumulated under the minimum income tax to pay off tax liabilities formed under the profit tax without any time limits. The Tax Code, however, introduced a new legal rule, providing for temporary restrictions - until January 1, 2017. As part of the legislative initiative, the government renounces the above norm, thereby returning to the previous setting.  The Armenian government also intends to partially abolish tax benefits when buying a mortgage home. The deputy minister recalled that the legal norm, effective since November 2014, had the goal of forming a stable and solvent demand in the sphere, as well as solving social problems. Every year, an amount of 2.8 billion drams is allocated from the budget to support the program participants. For today, any citizen of Armenia who prepares a mortgage deal returns the income tax paid by him in the form of repayment of interest on his mortgage loan. There are no restrictions on the number of such loans or the social status of the buyer at the moment. As a result, according to Ananyan, the social component turned out to be insignificant. In 2016, the state returned 1.9 billion drams to citizens. "1.6% of the beneficiaries received only 7% of these funds In 2017, 2.2% of the beneficiaries received 12% of all funds provided by the budget," Ananyan explained, adding that there is a person who within three years has received up to 6.6 million drams. Government monitoring revealed that more often the legal norm is used by those who do not have a goal to solve social problems, but only enriched themselves, acquiring the next real estate. In this regard, at this stage, the Ministry of Finance is changing the principle of work. "If there is a desire to stimulate the economy, by injecting money from the state budget, then the real estate market is not the direction of the economy of the republic, which requires investments from the state in priority order," he said. Thus, according to David Ananian, the government should focus resources on maintaining an exclusively social component of the program - the legal norm should support those who are actually solving their social issues. With a view to leveling such risks, the government decided to take a number of restrictions. In particular, from January 1, 2018, interest will not be compensated for a transaction exceeding 55 million drams (about 114 thousand dollars). The sum, according to the authors of the document, is equivalent to the cost of an apartment in 135-140 sq.m in the center of Yerevan. The second restriction will concern the size of the income tax, which the state returns to the "mortgage" - within one transaction not more than 1.5 million drams per quarter, regardless of the number of borrowers or co- borrowers. For a young family, if the couple acts as a borrower and co-borrower, this means that the monthly maximum amount of income tax in the form of a return from the state treasury for which they can claim is 500 thousand drams (in proportion to their monthly joint income of 1.6 or 1.7 million drams). And, thirdly, from January 1, 2018, a preferential program can be used once, be it a borrower or a co-borrower.

The deputy minister also informed that the package provides for the release of VAT from the area of inbound tourism in the next 3 years. He reminded that according to the current law "On VAT", a zero VAT rate applies to tour operators providing tourist services on the territory of Armenia. Meanwhile, when developing the Tax Code, which was adopted in September 2016, the government decided to abolish the benefits, as it aimed to reduce tax preferences and expand the tax base. Nevertheless, after discussions in the government, as well as meetings with representatives of the tourism sector and public organizations, it was decided to restore the tax privilege on the basis of inbound tourism with a reservation to return to this topic after 3 years. "The tour operator, thus, is given the opportunity to conduct business for another 3 years in preferential treatment, and the government will monitor the results in order to understand whether to retain the privilege or refuse it," - David Ananyan concluded.  As for the law on environmental payments, the deputy minister noted that the changes are aimed solely at activating the activities of the Ijevan Bentonite Plant. Today the enterprise, which is the only one in the republic in this area, exporting its products to the Russian Federation, operates less than 25% of its capacity. In order to stimulate the activity of the plant, the government proposed to reduce environmental payments for the development of bentonite deposits from 6% to 4%, and fixed environmental payments - from 2500 drams to 1,650 drams. At the same time, the budget will be short of 36-40 million drams, but from the point of view of the company's development, the revenues of the state treasury for other types of taxes from this enterprise are expected to be much more weighty.  The government also suggests changing the excise tax rates for a number of products. Thus, it is planned to revise the rates of excise tax on vodka made from fruit crops and berries, reducing the indirect tax from 880 drams to 550 drams per liter. Currently, a liter of vodka produced from fruit crops and berries in the Armenian market fluctuates between 3.5 and 4 thousand drams, sometimes reaching 7,000 drams. The proposed changes, according to the deputy minister, will make it possible to activate this sphere. Ananyan also recalled that from January 1, 2018 diesel fuel will be subject to VAT. In this regard, the amount of excise tax payments from 35,000 drams for the 1 tonne of diesel fuel sold will be reduced to 12,000 drams, despite the availability or absence of this type of fuel in December 2017. The deputy minister also announced the government's intention to refuse taxation on the VAT line of reusable packaging. At the same time, goods subject to excise duty from January 1, 2018, but imported or produced earlier, can be sold on the domestic market to the republic without excise stamps until March 31, 2018. It is also envisaged to revise the taxation of the public catering sector. According to the current regulation, as the deputy minister noted, catering facilities with a visitor service area of not more than 600 sq.m. taxed on preferential terms.  The rest were taxed in the general order.

The tax code from September 2016 reduced the preferential bar to 100 sq.m. The government made a decision for a while - until July 1, 2018 to restore taxation on preferential grounds for public catering facilities with an area of up to 600 sq.m. After July 1, the sphere will completely pass to the tax field of the turnover tax. The proposed rate of turnover tax for the sphere will be equal to 10% of the turnover, while at the same time providing the opportunity for the business owner to withdraw from the obligation 6% of the documented expenses, but not less than 4% of the turnover. After July 1, 2018, business entities will have the opportunity to move to a transitional stage, during which the turnover tax will be reduced from 10% to 8%, and 6% - to 5%. Nevertheless, from January 1, 2019, the established rates will be in effect - 10% and 6%. Despite the fact that the innovation, according to the deputy minister, creates more onerous conditions for the taxpayer, they should not lead to higher prices in the public catering system. The draft also provides for the establishment of a provision authorizing the implementation of accounting transactions in paper form, if one transaction in a monthly section does not exceed 3 million drams. 

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